As I mentioned yesterday, I was asked to pinch-hit for Steve Keen on a Chinese English-language business show this morning. They arranged for a trip up to the studio, which frankly struck me as more than a little overkill considering that they only asked me four questions. But it was a real learning experience, although unfortunately I was on a bit of an audio delay. Please keep in mind that I had no idea what the host was going to ask me, except that it would have something to do with China and President Trump’s recent comments about tariffs, because I wasn’t tuned in until about 10 seconds before the host addressed me.
The transcript follows. The sections in italics are the graphics that the producers popped up while we were talking.
YANG RUI: Let me cross over to Mr Vox Day, author of On the Question of Free Trade: An Economic Discourse, for his comments on the latest. What do you make of the impact on the European Union.
VOX DAY: Well, I think the threats from the European Union are essentially toothless. There is very, very little that the European Union can do when it comes to US trade policy. I think it’s a lot of political threat, but ultimately there is nothing they can do about it.
YANG: You mean there won’t be any reprisals from the European Union? Let’s look at such statistics. The exports as a percentage of each economy: Germany is 46 percent, South Korea 42 percent, Mexico 38 percent, and Canada 31 percent. China is just 20 percent, but we are still very much exposed compared to 12 percent (for the USA). So, all would suffer in a trade war if there would be a trade war. What do you think of the collective repercussions.
VOX: First of all, I think it’s important to understand that not everyone will suffer equally in a trade war, and some parties will benefit from it. For example, if you simply look at the United States alone and we take it to the most extreme, absurd example and suppose that the United States were to stop all imports and exports, that would immediately translate into a 3 percent annual boost to the US economy. If you look at how the GDP is calculated, it’s very simple. And so the fact that it might have a negative outcome on Europe, the fact that it would have a strong negative impact on South Korea, says nothing about what the impact on the United States is. And, of course, President Trump has made it very clear that with his America First policy, he is not as concerned about the economic state of the rest of the world.
US TARIFFS A PRELUDE TO A TRADE WAR
US has high domestic demandYANG RUI: Vox, what do you think of the Chinese response? What would be the most likely response from China, which was accused by the US government of only paying lip service instead of turning to actions, to reciprocate in terms of deals that are not quite in favor of the US. According to President Donald Trump, the US suffers $800 billion of trade deficit, that’s quite a lot.
US TARIFFS A PRELUDE TO A TRADE WAR
How will China respond in a trade war?VOX: I think China’s response is going to be very calm and measured. I don’t think there is any advantage to China in trying to engage in reprisals, simply because, you know, by definition, the reduction of imports into the US is going to boost their manufacturing and boost their GDP. And so the best thing for China to do is to simply play a long game, play a waiting game. It’s something they’re very good at. This main steel and aluminum tariff is not directed primarily at China and so there is no reason for China to overreact. Trump will do what he says he’s going to do; he’s pretty good about that.
YANG: But last year we enjoyed a trade surplus of $300 billion with the United States and John, the guest speaker here in the studio, says that China is likely to open up our capital market and to lay the groundwork for more American services to be provided here in the Chinese market. What do you think of the prospects?
US TARIFFS A PRELUDE TO A TRADE WAR
US “has an $800 billion yearly trade deficit”VOX: I don’t think that is going to be effective because Trump is not that concerned about Wall Street. He’s not that concerned about what you call the services market. He’s much more concerned about the industrial base, he’s much more concerned about the working class who have lost so many jobs over the last few decades. I think the most important aspect of that development you’re talking about is that it indicates that China is not disposed to respond to Trump’s harsh rhetoric with harsh rhetoric or ill-considered actions of their own.
I’ll share some of my thoughts on the experience later. And somewhat to my surprise, I was informed that they liked my answers and would like to have me back again sometime.